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Explain Cash Reserve Ratio. - Commercial Applications

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Question

Explain Cash Reserve Ratio.

Answer in Brief

Solution

  1. Commercial banks are required to keep a specified percentage of their cash reserves with the central bank.
  2. An increase in the cash reserve ratio reduces the capacity of commercial banks to grant credit.
  3. On the other hand, a decrease in the cash reserve ratio expands the credit-granting capacity of commercial banks.
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Credit Control by Central Bank
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Chapter 7: Banking and Bank Transactions - EXERCISES [Page 127]

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Goyal Brothers Prakashan Commercial Applications [English] Class 10 ICSE
Chapter 7 Banking and Bank Transactions
EXERCISES | Q 31. i. | Page 127
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